Supreme Court refers to European Court of Justice (“ECJ”) the question of whether changes to collective terms agreed post TUPE-transfer are binding on transferee.

The key issue in this case is whether changes to collective agreements made after a TUPE transfer can be binding on a transferee who is not party to the agreement or involved in the negotiation of the new terms.  Case law at ECJ level (in the case of Werhof,interpreting the European Acquired Rights Directive from which the TUPE regulations are derived) has held that collective agreements should be interpreted in a static way, so that a transferee employer would not be bound to honour any changes made to a collective agreement subsequent to an employee’s TUPE transfer.

However, an earlier decision of the EAT (in the case of Whent, interpreting the domestic TUPE regulations), found that post-transfer changes to a collective agreement could still be binding on the transferee employer.

The Supreme Court decided that the ECJ case of Werhof could be distinguished on its facts from the present case and therefore decided to refer the question to the ECJ.

Implications

The outcome of the referral to the ECJ will be significant, particularly for those employers involved in TUPE transfers in the public sector. The Court of Appeal’s earlier decision in this case, that TUPE should be interpreted on a static basis so that terms collectively negotiated post-transfer will not be binding on a transferee, remains good law while we await the ECJ’s decision.

This means that, for now at least, private sector transferees can maintain an argument that they are not bound to honour pay rates and increases agreed after their public sector employees have transferred to them. However, if the ECJ finds that the UK courts can give a dynamic interpretation to TUPE, the position is likely to be reversed, with important consequences for public sector outsourcing exercises.

Background

In this case the employees had been involved in a number of TUPE transfers originating from the leisure services department of the London Borough of Lewisham. The employees argued that the UK courts should give a dynamic interpretation to the TUPE regulations, so as to find that they are entitled to the benefit of collectively agreed pay increases that were negotiated by their original employer after they had transferred from it.